Question 1

Which of the following statements is true?

Accepted Answer

A)  In general, if a product has few substitutes it will have an elastic demand. 
B)  The more time that passes the more inelastic the demand for a product becomes. 
C)  The demand curve for a necessity is more elastic than the demand curve for a luxury. 
D)  The more narrowly we define a market, the more elastic the demand for a product will be. 
A)  In general, if a product has few substitutes it will have an elastic demand. 
B)  The more time that passes the more inelastic the demand for a product becomes. 
C)  The demand curve for a necessity is more elastic than the demand curve for a luxury. 
D)  The more narrowly we define a market, the more elastic the demand for a product will be.

Question 2

As a consumer consumes more and more of a product in a particular time period,eventually marginal utility

Accepted Answer

A)  rises. 
B)  is constant. 
C)  declines. 
D)  fluctuates. 
A)  rises. 
B)  is constant. 
C)  declines. 
D)  fluctuates.

Question 3

Necessities tend to have more inelastic demand than luxuries.

Accepted Answer

A) True 
 B)False

Question 4

Tickets for the Los Angeles production of the musical 'Hamilton' sold out quickly after going on sale in April. These tickets, sold through the box office at the Pantages Theater and through authorized seller Ticketmaster, were priced as low as $85 for mezzanine seats and $125 for orchestra seats. Once the tickets sold out, the only available seats for the musical which ran from August 11 through December 30, were through ticket resellers such as StubHub and SeatGeek, with tickets selling at an average price of $467 to $510. Ticket prices were the most expensive for August dates, with an average price of $624, and fell for dates in the following months, with December prices averaging $335.
Source: Nicholas Cheng, "Don't have a ticket to 'Hamilton' yet? It's going to cost you," Los Angeles Times, August 19, 2017.
-Refer to the Article Summary.Based on the difference between the face value of 'Hamilton' tickets sold by the Pantages Theater and Ticketmaster,and the prices being charged in the resellers like StubHub and SeatGeek,the demand at the face value of the tickets is

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  perfectly elastic. 
A)  elastic. 
B)  inelastic. 
C)  unit elastic. 
D)  perfectly elastic.

Question 5

Suppose the value of the price elasticity of demand is -3.What does this mean?

Accepted Answer

A)  A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. 
B)  A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. 
C)  A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. 
D)  A $1 increase in price causes quantity demanded to fall by 3 units. 
A)  A 1 percent increase in the price of the good causes quantity demanded to increase by 3 percent. 
B)  A 1 percent increase in the price of the good causes quantity demanded to decrease by 3 percent. 
C)  A 3 percent increase in the price of the good causes quantity demanded to decrease by 1 percent. 
D)  A $1 increase in price causes quantity demanded to fall by 3 units.

Question 6

The endowment effect is the tendency of people to be unwilling to sell a good they already own even if they are offered a price greater than they would be willing to pay to buy the good if they did not already own it.

Accepted Answer

A) True 
 B)False

Question 7

Some economists have argued that path dependence and switching costs can lead to market failure.Which of the following is an example of this argument?

Accepted Answer

A)  Costly celebrity endorsements lead many consumers to buy a product even though it is more expensive or less effective than a product that is not endorsed by a celebrity. 
B)  A consumer who won a lottery for a Super Bowl ticket refuses to sell it for $3,000 even though he would not have paid $3,000 for a ticket if he had not won the lottery. 
C)  While playing the ultimate game, an allocator decides to share $20 equally with a recipient rather than keep the $20 for herself. 
D)  VHS video recorders became more popular with consumers than Sony Betamax recorders even though the Betamax recorders embodied a superior technology. 
A)  Costly celebrity endorsements lead many consumers to buy a product even though it is more expensive or less effective than a product that is not endorsed by a celebrity. 
B)  A consumer who won a lottery for a Super Bowl ticket refuses to sell it for $3,000 even though he would not have paid $3,000 for a ticket if he had not won the lottery. 
C)  While playing the ultimate game, an allocator decides to share $20 equally with a recipient rather than keep the $20 for herself. 
D)  VHS video recorders became more popular with consumers than Sony Betamax recorders even though the Betamax recorders embodied a superior technology.

Question 8

In order to derive an individual's demand curve for salmon,we would observe what happens to the utility-maximizing bundle when we change

Accepted Answer

A)  income and hold everything else constant. 
B)  tastes and preferences and hold everything else constant. 
C)  the price of the product and hold everything else constant. 
D)  the price of a close substitute and hold everything else constant. 
A)  income and hold everything else constant. 
B)  tastes and preferences and hold everything else constant. 
C)  the price of the product and hold everything else constant. 
D)  the price of a close substitute and hold everything else constant.

Question 9

Rank these three items in terms of the elasticity of the demand for them at any given price,from most elastic to least elastic: hot beverages,coffee and Peet's Coffee.

Accepted Answer

A)  hot beverages, coffee, Peet's Coffee 
B)  Peet's Coffee, coffee, hot beverages 
C)  coffee, Peet's Coffee, hot beverages 
D)  coffee, hot beverages, Peet's Coffee 
A)  hot beverages, coffee, Peet's Coffee 
B)  Peet's Coffee, coffee, hot beverages 
C)  coffee, Peet's Coffee, hot beverages 
D)  coffee, hot beverages, Peet's Coffee

Question 10

The observation that people tend to value something more highly when they own it than when they don't is called the

Accepted Answer

A)  wealth effect. 
B)  endowment effect. 
C)  path-dependent effect. 
D)  endorsement effect. 
A)  wealth effect. 
B)  endowment effect. 
C)  path-dependent effect. 
D)  endorsement effect.

Question 11

Assume that you own a small boutique hotel.In an attempt to raise revenue,you reduce your rates by 20 percent.However,your revenue falls.What does this indicate about the demand for your boutique hotel rooms?

Accepted Answer

A)  Boutique hotel rooms are inferior goods. 
B)  Demand is inelastic. 
C)  The demand curve for your hotel rooms is vertical. 
D)  Demand is elastic. 
A)  Boutique hotel rooms are inferior goods. 
B)  Demand is inelastic. 
C)  The demand curve for your hotel rooms is vertical. 
D)  Demand is elastic.

Question 12

If the demand for a steak is unit elastic,then

Accepted Answer

A)  the percentage change in quantity demanded is 1 percent greater than the percentage change in price. 
B)  the percentage change in quantity demanded is equal to the percentage change in price. 
C)  the percentage change in quantity demanded is 100 percent greater than the percentage change in price (in absolute value). 
D)  quantity demanded does not respond to changes in price. 
A)  the percentage change in quantity demanded is 1 percent greater than the percentage change in price. 
B)  the percentage change in quantity demanded is equal to the percentage change in price. 
C)  the percentage change in quantity demanded is 100 percent greater than the percentage change in price (in absolute value). 
D)  quantity demanded does not respond to changes in price.

Question 13

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges,then Marlowe

Accepted Answer

A)  is maximizing total utility. 
B)  should buy more apples and fewer oranges. 
C)  should buy more oranges and fewer apples. 
D)  should buy fewer oranges and fewer apples. 
A)  is maximizing total utility. 
B)  should buy more apples and fewer oranges. 
C)  should buy more oranges and fewer apples. 
D)  should buy fewer oranges and fewer apples.

Question 14

Figure 7-3
   Bettye Babylon does not charge admission to her arboreal estate, the Hanging Gardens. Due to space limitations, Bettye only allows 200 visitors per day at her estate. The figure represents the supply and demand for admission to the Hanging Gardens.
-Refer to Figure 7-3.At a price of ________,there is a surplus of tickets.

Accepted Answer

A)  $0 
B)  between $0 and $10 
C)  $10 
D)  $25 
A)  $0 
B)  between $0 and $10 
C)  $10 
D)  $25

Question 15

Alan Krueger conducted a survey of fans at the 2001 Super Bowl who purchased tickets to the game for $325 or $400.Krueger found that (a)94 percent of those surveyed would not have paid $3,000 for their tickets,and (b)92 percent of those surveyed would not have sold their tickets for $3,000.These results are an example of

Accepted Answer

A)  the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay if they did not already own it. 
B)  the tendency for consumers to account for monetary costs but to ignore sunk costs. 
C)  consumers placing a high value on a product because it makes them appear to be fashionable. 
D)  the law of demand. 
A)  the tendency of people to be unwilling to sell a good they already own even if they are offered a price that is greater than the price they would be willing to pay if they did not already own it. 
B)  the tendency for consumers to account for monetary costs but to ignore sunk costs. 
C)  consumers placing a high value on a product because it makes them appear to be fashionable. 
D)  the law of demand.

Question 16

Terence has $50 per week to spend on Subway sandwiches and milkshakes.The price of a Subway sandwich is $5 and the price of a milkshake is $4.He buys 6 sandwiches and 5 milkshakes.The marginal utility of the 6th sandwich = 25 and the marginal utility of the 5th milkshake = 24.Which of the following is true?

Accepted Answer

A)  He is not maximizing his utility and should buy more milkshakes. 
B)  He is maximizing his utility. 
C)  He is not maximizing his utility and should buy more Subway sandwiches. 
D)  He is not maximizing his utility because he is not spending all of his income. 
A)  He is not maximizing his utility and should buy more milkshakes. 
B)  He is maximizing his utility. 
C)  He is not maximizing his utility and should buy more Subway sandwiches. 
D)  He is not maximizing his utility because he is not spending all of his income.

Question 17

Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is unit-elastic,and that the demand curve for cantaloupes is linear and downward sloping.If firms lower the price of cantaloupes to $2.00 which of the following statements can be made regarding the price elasticity of demand for cantaloupes?

Accepted Answer

A)  The demand for cantaloupes at $2.00 must be inelastic. 
B)  We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C)  The demand for cantaloupes at $2.00 must be elastic. 
D)  The demand for cantaloupes at $2.00 must be unit elastic. 
A)  The demand for cantaloupes at $2.00 must be inelastic. 
B)  We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. 
C)  The demand for cantaloupes at $2.00 must be elastic. 
D)  The demand for cantaloupes at $2.00 must be unit elastic.

Question 18

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

Accepted Answer

A)  the demand for salt will be perfectly inelastic. 
B)  salt is a normal good. 
C)  the demand for salt is relatively inelastic. 
D)  the price elasticity of demand for salt is greater than 1 (in absolute value). 
A)  the demand for salt will be perfectly inelastic. 
B)  salt is a normal good. 
C)  the demand for salt is relatively inelastic. 
D)  the price elasticity of demand for salt is greater than 1 (in absolute value).

Question 19

We can derive the market demand curve for gold earrings

Accepted Answer

A)  only if the tastes of all gold earring consumers are similar. 
B)  by adding horizontally the individual demand curves of each gold earring consumer. 
C)  by adding vertically the quantity demanded of each gold earring consumed at each price. 
D)  by adding the prices each gold earring consumer is willing to pay for each quantity. 
A)  only if the tastes of all gold earring consumers are similar. 
B)  by adding horizontally the individual demand curves of each gold earring consumer. 
C)  by adding vertically the quantity demanded of each gold earring consumed at each price. 
D)  by adding the prices each gold earring consumer is willing to pay for each quantity.

Question 20

Table 7-8
 $\begin{array}{|l|c|}
\hline & \begin{array}{c}
\text { Estimated PriceElasticity } \
\text { of Demand }
\end{array} \
\hline \text { Coca-Cola } & -3.0 \
\hline \text { All carbonated soft drinks } & -1.5 \
\hline \text { All soft drinks } & -0.8 \
\hline
\end{array}$
-Refer to Table 7-8.Assume that an economist has estimated the price elasticity of demand values in the table above.Use the data in the table to select the correct statement.

Accepted Answer

A)  The demand for Coca-Cola is inelastic. 
B)  The elasticity for "All soft drinks" is less than the elasticity for Coca-Cola because Coca-Cola is more of a luxury than a necessity; "All soft drinks" represent goods that are more necessity than luxury. 
C)  The difference in elasticity values is explained by the fact that the more narrowly we define a market the more elastic the demand will be. 
D)  There are fewer substitutes for "All carbonated soft drinks" than there are for "All soft drinks." 
A)  The demand for Coca-Cola is inelastic. 
B)  The elasticity for "All soft drinks" is less than the elasticity for Coca-Cola because Coca-Cola is more of a luxury than a necessity; "All soft drinks" represent goods that are more necessity than luxury. 
C)  The difference in elasticity values is explained by the fact that the more narrowly we define a market the more elastic the demand will be. 
D)  There are fewer substitutes for "All carbonated soft drinks" than there are for "All soft drinks."

Which of the following statements is true?

As a consumer consumes more and more of a product in a particular time period,eventually marginal utility

Necessities tend to have more inelastic demand than luxuries.

Suppose the value of the price elasticity of demand is -3.What does this mean?

The endowment effect is the tendency of people to be unwilling to sell a good they already own even if they are offered a price greater than they would be willing to pay to buy the good if they did not already own it.

Some economists have argued that path dependence and switching costs can lead to market failure.Which of the following is an example of this argument?

In order to derive an individual's demand curve for salmon,we would observe what happens to the utility-maximizing bundle when we change

Rank these three items in terms of the elasticity of the demand for them at any given price,from most elastic to least elastic: hot beverages,coffee and Peet's Coffee.

The observation that people tend to value something more highly when they own it than when they don't is called the

Assume that you own a small boutique hotel.In an attempt to raise revenue,you reduce your rates by 20 percent.However,your revenue falls.What does this indicate about the demand for your boutique hotel rooms?

If the demand for a steak is unit elastic,then

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges,then Marlowe

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

We can derive the market demand curve for gold earrings

Table 7-8 Estimated PriceElasticity of Demand Coca-Cola -3.0 All carbonated soft drinks -1.5 All soft drinks -0.8 -Refer to Table 7-8.Assume that an economist has estimated the price elasticity of demand values in the table above.Use the data in the table to select the correct statement.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

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Exam 7: Consumer Choice and Elasticity

Which of the following statements is true?

As a consumer consumes more and more of a product in a particular time period,eventually marginal utility

Necessities tend to have more inelastic demand than luxuries.

Suppose the value of the price elasticity of demand is -3.What does this mean?

The endowment effect is the tendency of people to be unwilling to sell a good they already own even if they are offered a price greater than they would be willing to pay to buy the good if they did not already own it.

Some economists have argued that path dependence and switching costs can lead to market failure.Which of the following is an example of this argument?

In order to derive an individual's demand curve for salmon,we would observe what happens to the utility-maximizing bundle when we change

Rank these three items in terms of the elasticity of the demand for them at any given price,from most elastic to least elastic: hot beverages,coffee and Peet's Coffee.

The observation that people tend to value something more highly when they own it than when they don't is called the

Assume that you own a small boutique hotel.In an attempt to raise revenue,you reduce your rates by 20 percent.However,your revenue falls.What does this indicate about the demand for your boutique hotel rooms?

If the demand for a steak is unit elastic,then

If Marlowe obtains 9 units of utility per dollar spent on apples and 6 units of utility per dollar spent on oranges,then Marlowe

Most people buy salt infrequently and in small quantities.Even a doubling of the price of salt is likely to result in a small decline in the quantity of salt demanded.Therefore

We can derive the market demand curve for gold earrings

Table 7-8 Estimated PriceElasticity of Demand Coca-Cola -3.0 All carbonated soft drinks -1.5 All soft drinks -0.8 -Refer to Table 7-8.Assume that an economist has estimated the price elasticity of demand values in the table above.Use the data in the table to select the correct statement.

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Technology,Production,and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters